Friends of Canadian Broadcasting is an
independent watchdog for Canadian programming on radio, television and new
media supported by 150,000 persons. FRIENDS does not seek to appear at the June
20 public hearing.

Under the watchful eye of your Commission, consolidation
in the broadcasting industry has reached the point where four broadcasting
distribution undertakings (BDUs): Bell, Quebecor, Rogers and Shaw now control
all Canadian television channels other than a few small independents and the
Canadian Broadcasting Corporation.

We presume that the Commission considers the plus
side of consolidation - the control of most television channels by
well-financed entities - exceeds the negative effects of excessive
concentration of ownership including reduced diversity of voices in the
television system. But this calculus pre-supposes that the industry will
benefit from cross-subsidization, where appropriate.

As you know, cross-subsidization is a
cornerstone of the Canadian broadcasting system where, for example, the sale of
US programming has generated revenue to finance Canadian programming and where
English-language programming on ethnic channels has cross-subsidized
third-language programming.

Through conditions of licence, your Commission
has the authority to enforce cross-subsidization, particularly where you are
aware of the profitability of other parts of the regulated business.

BDU profits now exceed conventional broadcasting
revenues. 'Market forces' do not apply to a 'negotiation' between parties where
one side dominates the other. Only large broadcasters with 'must carry'
services (either through regulatory requirement or popularity) have any hope of
achieving equitable agreements with BDUs based on negotiation. As all such
broadcasters are now controlled by distributors, the focus of your attention
regarding undue preference or disadvantage should be directed towards
protecting the interests of the small independent players.

FRIENDS is concerned to read in the Notice
references to "the potential to
behave in an anti-competitive manner" when a review of the transcripts from the
recent BDU hearing makes clear that you have heard extensive evidence from the
largest to the smallest broadcasters of predatory practices on the part of
BDUs. However, now it is only the smaller players that continue to exist
independently of corporate BDU control. We question whether it would be in the
business interest of any independent broadcaster to confront your Commission
with evidence of predatory behaviour from entities that exercise effective
control over their very survival.

Going forward, the public interest requires that
the Commission presume that undue preference and disadvantage is pervasive, and
regulate accordingly. As an example of appropriate regulation, FRIENDS cites
the re-distribution of a small portion of BDU profit through the Local
Programming Improvement Fund, which has protected and enhanced Canadian local
programming in smaller centres throughout the land.

As a result of research presented to your
Commission by our colleagues at the Communications, Energy and Paperworkers
Union, it is clear that de-regulation of basic cable by Rogers and Shaw led to
a 65% to 80% increase in rates during the first six years since de-regulation, while
the CPI increased by only 15% over that period. Appropriate regulation is part
of your mandate. You have all the authority you require within existing
legislation.

Absent
effective regulation, when new packaging rules are implemented in September
2011 Canadians can expect to see even more BDU 'creativity' at the expense of
smaller, independent licensees.

Under
the protection of the Broadcasting Act, independent producers have thrived in
Canada and produced thousands of hours of programming which is now viewed not
only throughout Canada, but around the world. Protecting independent owners was
not contemplated two decades ago when Parliament passed the Act because in 1991
virtually the entire industry was comprised of small, independent companies.
Since then, approval of successive transactions has promoted consolidation,
leading step-by-step to the present vertically-integrated structure.

Independent
owners are now an endangered species because, without access to distribution
controlled by only four decision-makers, they are denied access to well over
90% of Canadian viewers. FRIENDS encourages the Commission not only to
recognize the importance of independent ownership to the health of the Canadian
broadcasting system, but also to embrace the need to provide similar protections
for independent owners such that they can, in fact, access viewers and receive
fair compensation for the services they provide.

Regarding
the proposed reduction in the transparency of specialty and pay financial
information, the public interest requires publication of these financials. In
addition to the public interest, it is essential to maintain historically
consistent information in order to measure the effect of consolidated BDU
ownership on the system.

Although
the industry may consider the benefits test as a 'land transfer tax', from a
public policy and public interest perspective, public benefits have made
critical contributions to support and expand the quality and quantity of
Canadian programming. The 'first' BCE CTV takeover benefits, for example, proved
conclusively that a properly developed, funded and promoted Canadian series
could generate audience levels that were competitive with the most popular of
Hollywood fare: witness Corner Gas.

There
remains an inherent lack of equity when radio transactions benefits are set at
6%, television at 10% and distributors at 0%. Removing the BDU public benefit
has transferred hundreds of millions of dollars away from Canadian programming
and into shareholders dividends, while contributing to the present
consolidation. Consider the example of Aurora Cable, which initially resisted
Rogers' offers. Rogers then announced that they would over-build Aurora, which
led to a change of heart on the part of the small distributor - akin to
Chicago's mayor welcoming Al Capone to town.

FRIENDS
supports a 10% public benefit for all transactions in the broadcasting sector.
We also support a smaller, affordable regulated basic service.